Turkmenistan’s President Gurbanguly Berdimukhamedov has signed a decree on the formation of a working commission responsible for supervising implementation of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, as well as of the transport corridors and energy bridges along the Turkmenistan-Afghanistan-Pakistan route, the Turkmen state news agency reported on January 15. Evidently, the holder of the world’s fourth largest gas reserves exudes cautiously confident optimism about the future of the repeatedly frozen project, intended to diversify its eastward export routes away from China, who is expected to double annual imports of Turkmen gas up to over 60BCM/a by 2020. This goal gains further importance against the backdrop of Gazprom’s 2016 decision to stop purchasing gas from Turkmenistan, prompting a sharp decline in the country’s hard currency revenue.
The 1.814km TAPI will cover 214km, starting from the giant Galkynysh onshore gas deposit, before reaching the Turkmen-Afghan border. In Afghanistan, it will traverse 774km through the provinces of Herat, Farah, Helmand, Nimroz and Kandahar. The 826km-long route within Pakistan will pass near Quetta, provincial capital of Baluchistan, and Multan in the province of Punjab, finally reaching India at Fazilka. The pipeline’s groundbreaking was performed in December 2015. Its cost and capacity are estimated at $10bn and 33BCM, respectively. Pipeline laying operations in Afghanistan are scheduled to begin in February, simultaneously with the laying of a fiber-optic communication line along the same route and the Turkmenistan-Afghanistan-Pakistan power transmission line.
The project’s timely completion dominated last week’s meeting in Islamabad between the Pakistani Prime Minister, Shahid Khaqan Abbasi, and Turkmenistan’s Foreign Minister, Rashid Meredov. Mr. Meredov called upon Pakistani companies to take part in the tenders announced by Turkmenistan for TAPI, while Mr. Abbasi applauded the progress made on the project to this day. Even though pipeline construction is likely to suffer delays on Afghan territory due to falling natural gas prices and security issues, TAPI represents a tailor-made opportunity for Ashgabat to escape its long-lasting isolation and establish itself as a reliable supplier for states like Pakistan and India, where natural gas demand is predicted to rise by 50% until 2030. Mr. Abbasi’s agreeable stance to the project, in the course of deliberations with Mr. Meredov, was taken as a result of the acknowledgment of TAPI’s positive impact explained above. However, renegotiation of the gas pricing formula for TAPI under the sales and purchase agreement with Turkmengaz, in order for the cheaper rates, at which Pakistan has so far concluded two LNG contracts, to be matched, is still an issue of concern for the country. As already happens with the majority of contracts in the Asia-Pacific region, the agreement links gas prices to Japan crude cocktail at 64% of its value. But according to a clause, if Pakistan ever managed to secure less expensive gas imports, TAPI prices would have to be brought down to those levels. In 2016, Pakistan and Qatar inked a 15-year multi-billion LNG deal, with the price for each cargo set at 13.37% of the preceding three-month average of a barrel of Brent crude. Soon after, Pakistan LNG Company awarded a long-term LNG supply contract to Eni after gaining a discount offer from the Italian firm for a price at 11.99% of crude oil rate.
Apart from Pakistan’s demand for a pricing revision, financing also plays a key role in order for the project to come on stream as per the current schedule. Ashgabat has for the time being sought to rope in the European Bank for Reconstruction and Development, Asian Development Bank and the Japanese government as partners in TAPI. Furthermore, in the midst of the unfolding domestic tumult, topped by the latest purge of royal family ‘’rivals’’ by the Crown Prince Mohammed bin Salman, Saudi Arabia appears equally interested in investing in TAPI. Following approval of a $700M loan from the Islamic Development Bank, Ashgabat officially thanked on January 19 the Kingdom for the extra funds granted to TAPI by the Saudi Fund for Development, under bilateral accords reached in May 2016. Mr. Berdimukhamedov said that the SFD investments are a sign of the high appreciation of TAPI’s “potential, profitability and payback.” Nevertheless, behind the zesty Saudi investment plans for the provision of pipeline material for TAPI and for additional oil and gas development activities in Turkmenistan, one can read the growing geopolitical competition between KSA and its regional heavyweight in the Middle East, Iran. The latter is at the moment attempting to settle an open-ended debt row with Turkmenistan in International Arbitration, so that its poorly supplied northeastern regions are not left in the cold until foreign investments in Iranian gas sector render unnecessary future gas imports from the neighboring energy-rich Caspian state.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-january-25-2018/#5